Keystone's Morning Wake-Up and Midday Market Action 8/23/13; New Home Sales

The Nasdaq is set to move higher today despite yesterday's Flash Freeze. Nasdaq CEO Greifeld crawls out from hiding under his desk and tries to smooth the mess over this morning. At least he has experience in this area considering the FB IPO debacle. Concern grows over a currency crisis in the emerging markets similar to the late 1990's. The big question today is if a recovery rally is in place, or not. The 8 MA moved above the 34 MA on the SPX 30-minute chart signaling bullish markets ahead. This is the first sign of a rally so watch to see if the positive 8/34 cross remains in place, or not. Another metric creating drama is the VIX 200-day MA at 14.65. VIX begins at 14.76. If VIX drops under 14.65, the bulls will begin drinking early, ahead of the weekend, and looking for lamp shades to wear as they celebrate a strengthening upside rally. If the VIX stays above 14.65, the bulls got nothing. The SPX 50-day MA is 1658.87 a battleground as the day begins. Bulls win above 1659. Bears win below 1658. The SPX created a near-term low by bouncing off the 20-week MA at 1639-1640.

With the push higher in markets yesterday, it was odd that none of Keybot's metrics turned bullish. UTIL 483.16, XLF 20.12 and VIX 14.23 all remain negative causing market bearishness. Watch these three parameters closely since any one of them flipping to the bull camp will signal that the relief rally is real. If none of the three turn bullish, the markets will roll over to the downside and continue lower. If 2 of the 3 parameters turn bullish, and the SPX moves above 1659, and stays above, Keybot will likely flip to the long side. For the SPX today starting at 1657, the bulls need to punch through the 50-day MA above 1659 and it is all blue skies above with an upside acceleration to the 1666 resistance, and perhaps 1669. The bears need to push under 1645 to create a downside acceleration that would immediately test the 20-week MA at 1640, which would likely fail. The bears will likely instead focus on keeping utes, financials and volatility in the bear camp since this will ensure that any bounce is simply a dead-cat bounce. A move through SPX 1646-1658 is sideways action. New Home Sales hit at 10 AM EST which will create a market pivot point. Thus far this week, the SPX is flat, the Dow is down, and the Nasdaq and RUT is up. Tech and small caps leading higher is a plus for the bull case.

Note Added 10:03 AM:  Gap and crap at the opening bell. New Home Sales are a big disappointment reflecting the negativity in the Mortgage Applications over the last three months. SPX moves above the 50-day MA at 1659.25, but then falls back under. UTIL 479.25. XLF 19.98.  VIX 14.76 (above both the 200-day MA and Keybot's 14.23 number). Keystone took profits, very small ones, only enough for a hotdog and a coke, on the long SPXL trade, exiting the position on the opening print. Also bot JO opening a new long position that is long coffee. Keystone repeats over and over that coffee is reminiscent of natty gas about one and one-half year ago. Very attractive positive divergence exists for JO moving forward although it may take time to base. It is likely one of the few attractive places to hide money if a major market selling event occurs.

Note Added 10:17 AM:  VIX 14.67 and the 200-day MA is 14.65. This will tell the tale. Will bulls receive some go juice, or not? Big leap higher in UTIL now up towards 482.

Note Added 12:36 PM:  The bulls push VIX lower to 14.39, under the 200-day MA, but not yet able to push under Keybot's line in the sand at 14.23. UTIL spiked above the critical 483.16, closing the trap-door, but the door opened again and UTIL is now printing a 481 handle. Financials are receiving a negative vibe due to the potential Moody downgrades coming.  XLF is 19.99 remaining bearish under the 20.12.  Retail is weak. TRIN drops to 0.87 which is helping the bulls today. SPX is 1660.86 above the 50-day MA at 1659.36. The 8 MA remains above the 34 MA on the 30-minute chart giving the bulls the nod. So there is something for everyone today. Volume is below average at a run rate of about 70% of a day's average expected volume.  VIX 14.23 is a biggie so use that as a tie-breaker. Bulls win below VIX 14.23.  Bears win above 14.23. In the 'don't let the door hit you' department, poor ole Ballmer announces his resignation from MSFT in the coming months and the stock catapults higher. But do not shed any tears since poor ole Ballmer is actually rich ole Ballmer.

Note Added 12:46 PM:  Speak of the devil, here's the big decision maker for today; VIX is at 14.26 now only 3 pennies from 14.23. What say you bulls and bears? Who wants to run with the ball? High drama....

Note Added 2:46 PM:  Sideways for two hours. VIX is 14.26. Volatility sits on the fence unable to yet pick a direction. Whichever way the VIX moves from here, equities will move in the opposite direction. UTIL 482.04.  XLF 20.01. TRIN 0.93. Utes and financials are trying to gain some upside and are perched and waiting to follow whatever VIX decides. SPX is 1660.87. HOD is 1661.83. The 50-day MA is 1659.35. The 1661-1662 is a very strong ceiling all day long today so if price moves above, that would supply bull juice. Markets tend to float higher on Friday afternoons as short sellers pare back positions in front of the weekend.

Note Added 2:54 PM:  VIX 14.24; decision time, bounce or die. Interesting. The 2:55 PM time stamp is when the fifth of the five 65-minute trading sessions begin.

Note Added 3:05 PM:  VIX 14.23 so the market direction decision will now occur. ... 14.24 ...... 14.23 .....

Note Added 3:40 PM:  VIX falls through 14.23 so the bulls throw confetti.  SPX prints a new HOD at 1662.67 breaking through the 1661-1662 ceiling. See if the bulls can keep the VIX under 14.23 into the closing bell.

Note Added 3:55 PM: Big drop in VIX so pop in SPX. Note UTIL knocking on the 483.16 door again. Keystone bot SCO opening a new long position in this ETF that is short oil.

Note Added 6:21 AM on 8/24/13: Bulls pull a sneak attack to finish the week, catapulting utilities, financials and retail higher into the closing bell while thwacking volatility lower. VIX closes under 14. UTIL is under 483 but only a hair away from causing market bullishness above 483.14. XLF is 20.06 only pennies from 20.12 that will add further bull fuel. The bulls waited all day to change the game in their favor at the closing bell. For Monday, if utilities move a few pennies higher, and if the SPX moves a couple points higher, Keybot the Quant will likely flip long.